Question 1

Bergson's name is associated with
A)Social welfare function
B)Pareto Optimality criterion
C)Compensation criterion
D)Welfare maximization criterion

Accepted Answer

Bergson is known for the Bergson-Samuelson social welfare function, which is a method to evaluate the welfare of a society based on individual utilities.

Question 2

Which among the following is NOT a correct statement?
A)Welfare economics is based on value judgments.
B)Welfare economics is also called 'economics with a heart'.
C)Welfare economics focuses on questions about equity as well as efficiency.
D)The founder of Welfare economics was Alfred Marshall.

Accepted Answer

The founder of Welfare economics is not Alfred Marshall; it is more accurately associated with economists like Arthur Pigou and later developments by others such as Amartya Sen. Alfred Marshall is known for his contributions to microeconomic theory, not specifically for founding welfare economics.

Question 3

When the allocation of resources is Pareto efficient
A)society is providing the greatest good to the greatest number.
B)no consumer would prefer someone else's consumption bundle to his or her own.
C)it is not feasible to make someone better off without making someone worse off.
D)it is feasible to make someone better off without making someone worse off.

Accepted Answer

Pareto efficiency, or Pareto optimality, is a state of allocation of resources in which it is impossible to make any one individual better off without making at least one individual worse off. This concept does not necessarily imply an equitable distribution of resources, but rather that no further improvements in allocation can be made without disadvantaging someone.

Question 4

If some allocation of resources is Pareto efficient, then that allocation satisfies:
A)allocative efficiency and productive efficiency.
B)allocative efficiency and distributive efficiency.
C)productive efficiency and distributive efficiency.
D)allocative efficiency, productive efficiency, and distributive efficiency.

Accepted Answer

The answer of If some allocation of resources is Pareto...

Question 5

When two commodities X and Y must be allocated among consumers, a necessary condition for distributive efficiency is that:
A)all firms be price takers.
B)all firms minimize cost.
C)commodity X must be allocated to the consumers with the largest values of MRSXY
D)the marginal rates of substitution MRSXY for all consumers must be equal.

Accepted Answer

Distributive efficiency, also known as allocative efficiency, occurs when goods are distributed in a way that maximizes total utility. For this to happen with two commodities, X and Y, the marginal rates of substitution (MRSXY) between these commodities must be equal for all consumers. This ensures that no one can be made better off without making someone else worse off, achieving an optimal allocation of resources.

Question 6

The necessary condition for allocative efficiency is that each commodity be produced in an amount that makes the marginal benefit to society of the last unit produced equal to the marginal cost to society of that last unit. The satisfaction of this condition in a market economy relies on the assumptions of:
A)utility maximization, profit maximization, and perfect competition.
B)utility maximization and profit maximization, but not perfect competition.
C)profit maximization and perfect competition, but not utility maximization.
D)utility maximization and perfect competition, but not profit maximization.

Accepted Answer

Allocative efficiency in a market economy is achieved when the marginal benefit to society equals the marginal cost of production. This condition relies on the assumptions of utility maximization (consumers aim to get the most satisfaction from their resources), profit maximization (firms aim to maximize their profits), and perfect competition (a market structure where no single producer or consumer can influence the market price). These assumptions ensure that resources are allocated in the most efficient way possible, leading to the optimal production and consumption levels of goods and services.

Question 7

The Fundamental Theorem of Welfare Economics:
A)shows that the allocation of resources generated by a complete system of perfectly competitive markets results in all consumers attaining the same utility level.
B)refers to the biblical observation that "the poor ye shall always have with you."
C)implies that no intervention in the workings of markets can be justified on efficiency grounds.
D)holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.

Accepted Answer

The Fundamental Theorem of Welfare Economics states that any competitive equilibrium leads to a Pareto efficient allocation of resources, meaning that no one can be made better off without making someone else worse off. It does not imply uniform utility levels across consumers (A), is not a biblical reference (B), and does not suggest that market interventions are never justified on efficiency grounds (C).

Question 8

If an economy operates on its production possibility curve, then the allocation of resources in that economy satisfies:
A)allocative efficiency.
B)distributive efficiency.
C)Pareto efficiency.
D)productive efficiency.

Accepted Answer

Operating on the production possibility curve indicates that the economy is using its resources efficiently to produce the maximum possible output, which is known as productive efficiency.

Question 9

If a brother and sister return home from trick-or-treating on Christmas and engage in a series of voluntary trades of candy, we can conclude that:
A)the initial allocation of candy between them was distributively inefficient.
B)the initial allocation of candy between them was distributively efficient.
C)their preferences must be different.
D)the candy they collected around the neighborhood must have been different.

Accepted Answer

The answer of If a brother and sister return home...

Question 10

Growth of GNP as A Criterion of Welfare was advocated by
A)Kaldor-Hicks
B)Adam Smith
C)A. C. Pigou
D)Prof . Bergson

Accepted Answer

The answer of Growth of GNP as A Criterion of...

Question 11

Welfare is improved when 'the greatest good (is secured) for the greatest number' is a statement given by
A)Kaldor-Hicks
B)Adam Smith
C)Jeremy Bentham
D)Prof . Bergson

Accepted Answer

Jeremy Bentham is associated with the principle of utilitarianism, which advocates for actions that secure the greatest happiness for the greatest number of people.

Question 12

A situation in which it is impossible to make anyone better-off without making someone worse-off is said to be
A)bentham Optimal
B)Pareto-optimal
C)Hicks Optimal
D)Bergson Optimal

Accepted Answer

Pareto-optimal, or Pareto efficiency, is a state where no individual or preference criterion can be better off without making at least one individual or preference criterion worse off. This concept is a fundamental idea in the field of economics and game theory, relating to efficiency and welfare economics.

Question 13

The concept of 'Social Welfare Function' was propounded by A. Bergson in his article 'A Reformulation of Certain Aspects of Welfare Economics' published in the year 1938
A)1932
B)1935
C)1938
D)1942

Accepted Answer

The concept of 'Social Welfare Function' was indeed introduced by Abram Bergson in his article 'A Reformulation of Certain Aspects of Welfare Economics', which was published in the year 1938.

Question 14

The locus of the various physically attainable utility combinations of two persons when the factor endowments, state of technology and preference orders of the individuals are given.
A)grand utility possibility frontier
B)Maximum utility frontier
C)Pareto Optimality frontier
D)Hicks Utility Frontier

Accepted Answer

The grand utility possibility frontier represents the locus of various physically attainable utility combinations of two persons, given their factor endowments, state of technology, and preference orders. It illustrates the maximum utility levels that can be achieved for each person, given the constraints.

Question 15

A famous welfare economics book called, "Economics of Welfare" was written by
A)Kaldor-Hicks
B)Adam Smith
C)A. C. Pigou
D)Prof . Bergson

Accepted Answer

"Economics of Welfare" is a seminal work in the field of welfare economics written by Arthur Cecil Pigou, published in 1920. Pigou's work laid the foundation for much of the study of welfare economics, focusing on how economic policies can affect social welfare and the distribution of resources.

Question 16

Who defines economic welfare as "that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money."
A)Kaldor-Hicks
B)A. C. Pigou
C)Pareto
D)Prof . Bergson

Accepted Answer

A. C. Pigou defined economic welfare as "that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money." This definition is part of his broader work on welfare economics, where he explored how economic policies could affect social welfare.

Question 17

Kaldor-Hicks compensation principle can be explained with the help of
A)Utility possibility curve
B)Indifference curve
C)Equal product curve
D)Kuznet's curve

Accepted Answer

The Kaldor-Hicks compensation principle can be explained with the help of the Utility Possibility Curve, which illustrates how one individual's utility can be improved without reducing the utility of another, a concept central to welfare economics and the principle itself.

Question 18

Welfare Economics is generally accepted as
A)Positive science
B)Normative science
C)Both of the above
D)None of the ab

Accepted Answer

Welfare economics is considered a normative science because it evaluates economic policies and situations based on value judgments about what is good or desirable for society, rather than just describing and analyzing economic behavior and relationships.

Question 19

According to AC Pigou, any reorganization of the economy which increases the share of the poor without reducing the national income is also considered an
A)decrease in social welfare
B)reduction in social welfare
C)improvement in social welfare
D)None of the above

Accepted Answer

Pigou, a key figure in welfare economics, argued that redistributing income to the poor can improve social welfare if it does not reduce the overall national income, as it addresses issues of inequality and enhances the overall utility of society.

Question 20

In Pareto welfare economics, Efficiency of distribution of commodities among consumers is related to
A)efficiency in production
B)efficiency in exchange
C)efficiency in product-mix
D)All of the above

Accepted Answer

Efficiency in exchange refers to the optimal distribution of goods among consumers, where no one can be made better off without making someone else worse off, aligning with Pareto efficiency in distribution.

Quiz 5: Welfare Economics and Efficiency Allocation

Bergson's name is associated with

Which among the following is NOT a correct statement?

When the allocation of resources is Pareto efficient

If some allocation of resources is Pareto efficient, then that allocation satisfies:

When two commodities X and Y must be allocated among consumers, a necessary condition for distributive efficiency is that:

The Fundamental Theorem of Welfare Economics:

If an economy operates on its production possibility curve, then the allocation of resources in that economy satisfies:

If a brother and sister return home from trick-or-treating on Christmas and engage in a series of voluntary trades of candy, we can conclude that:

Growth of GNP as A Criterion of Welfare was advocated by

Welfare is improved when 'the greatest good (is secured) for the greatest number' is a statement given by

A situation in which it is impossible to make anyone better-off without making someone worse-off is said to be

The concept of 'Social Welfare Function' was propounded by A. Bergson in his article 'A Reformulation of Certain Aspects of Welfare Economics' published in the year 1938

The locus of the various physically attainable utility combinations of two persons when the factor endowments, state of technology and preference orders of the individuals are given.

A famous welfare economics book called, "Economics of Welfare" was written by

Who defines economic welfare as "that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money."

Kaldor-Hicks compensation principle can be explained with the help of

Welfare Economics is generally accepted as

According to AC Pigou, any reorganization of the economy which increases the share of the poor without reducing the national income is also considered an

In Pareto welfare economics, Efficiency of distribution of commodities among consumers is related to